Visible Equity’s setting for Original Credit Score Days Within (which I’ll refer to more simply as “Days Within”) is not typically changed from the default setting. That may be because even the default setting can be a bit challenging to understand. This article will use an example to try and break down exactly what happens with this setting.
In short, the Days Within setting tells the system that any credit score on a loan must be within X number of days to be considered the original credit score. The Visible Equity default value leaves this as “Not Set”. This essentially means that a credit score may or may not be considered as the original credit score dependent on when that score was pulled relative to both the origination date and the data date (month-end date of the reporting period). By changing Visible Equity’s default value, this setting allows your institution to define how close a credit score (based on the score pull date) needs to be to the loan origination date in order to be an eligible original credit score. Don’t worry, it’ll make sense in a minute.
Let’s use an example to visualize this concept. Use the information on the table below for a fictitious loan ID, 1234, and borrower, Robert. The columns for Origination Date, Score, and Score Date all remain the same in each row. We are only changing the Data Date and viewing the final column to determine whether or not Robert’s credit score will be used as the loan’s original credit score.
Let’s first set the table chronologically based on the given dates.
- First, the loan is originated on January 1, 2017.
- Second, Robert records a credit score of 700 on October 1, 2017.
- Third, we are reporting on two separate data dates, March 2018 and December 2018.
What is the reasoning that the 700 credit score is both used and NOT used as the original score in these two cases? As I previously stated, it depends on the pull date of the credit score relative to the to the Origination Date versus the Data Date. Here are the rules.
- If the Score Date is closer to the Origination Date than it is to the Data Date being reported on, (even if the score is not as of or near the origination date) the score will be used as the original credit score.
- If the Score Date is closer to the Data Date being reported on than it is to Origination Date, the score will NOT be used as the original credit score.
Surely that is clear as mud.
Let’s look at this example visually to internalize the concept more effectively. Check out the graphic below. The blue and orange dots representing the Origination and Score dates, respectively, are in fixed positions—they will not change. What does change is the time period we are using to report on, represented by the pink and yellow dots, March 2018 and December 2018, respectively. Depending on the data date of the report, the October 2017 credit pull may or may not be considered as the original credit score for this loan.
Look first at the pink lines. The orange dot is clearly closer to the pink dot than it is to the blue dot. This means that the October 2017 credit pull is closer to the March 2018 data date being reported on and that it cannot be considered as the original score. However, looking at the yellow lines, we see that the Score Date is now closer to the Origination Date on our timeline than it is to the December 2018 Data Date being reported on. In this case, Robert’s 700 score from October 2018 would be an eligible original score for his January 2017 loan.
This example begs the question—why did we not report a true original credit score when Robert’s loan was opened? The data could be erroneous, missing entirely, or it could be that the lack of a credit score is accurate because Robert didn’t have a credit score when the loan was originated. Regardless of the reason, additional data can always be delivered to Visible Equity to backfill missing data in these types of scenarios. It may be that the data is unavailable, and that’s okay too.
Now, let’s talk about this setting when the default value isn’t being used. This is, quite honestly, much simpler than the default setting. First off, whole numbers must be used. Secondly, the number used will set a hard limit stating that the eligible score must be within X number of days from the origination date. It is important to note that the system will look X number of days from the origination date in either direction. That means that a setting of 90 days technically uses a 180-day window—90 days prior to the origination date and 90 days after the origination date.
Let’s continue Robert’s example and use ‘90’ as our Days Within setting. This now means that a credit score must be within 90 days of the loan origination date in order to be an eligible original credit score. In this adjusted scenario, Robert’s 700 score as of October 2018 could never be considered as his loan’s original score, as the score was pulled well after the 90-day threshold.
Here’s one final example to cover a unique scenario. In this example, our Days Within setting is set at 30 days within the origination date. What if a loan has two borrowers where Borrower A has a score that is three days prior to the loan origination date and Borrower B has a score that is 20 days after the loan origination date? Borrower A’s score is closer to the origination date, however, it takes a back seat to Borrower B’s score that comes after the loan origination date. This is because the Visible Equity system will give priority to a score that is equal to or after the loan origination date before it will use a score that comes before the origination date.
The Visible Equity default setting works for most clients in most cases. If you are not most clients that is perfectly fine. These settings exist to allow you to make changes. There is no wrong or right answer here; it is merely a matter of preference. Contact our client success team directly to verify or adjust the setting for your portfolio.